By Peet Serfontein & Jalpa Bhoolia
Clicks Group is a health and beauty-focused retail and supply group. Through their market-leading retail brands, Clicks, Sorbet, Claires and The Body Shop, the group has hundreds of stores across southern Africa, while United Pharmaceutical Distributors (UPD) provides distribution capability for the group's healthcare strategy and has close to a third of market share in private pharmaceutical wholesale in South Africa.
Clicks is a defensive company and is characterised by growth, high return on equity (ROE), strong cash conversion and execution.
Technically, a price that is in a rectangle pattern, makes for an interesting investment option (see the grey shading on the main chart).
The pattern is also known as a consolidation and can support a bullish tone for a share, particularly when formed during an uptrend. It occurs when the share fluctuates between defined support and resistance levels, creating a "rectangle". The rectangular pattern often represents a period of accumulation, with steady buying activity at lower levels (support), but the price remains capped by a resistance level. This suggests that investors are gradually building positions in anticipation of a breakout.
The insert shows the Relative Price Strength (RPS) analysis for the share, comparing its performance relative to other shares on the JSE All Share Index. The black line is the price action of Clicks. The RPS ranking was inverted, allowing it to be overlaid with the price, and a ten-week average trend was calculated for both the price and ranking. An upward trend in the ranking (see the amber colour) is a bullish indicator.
The share is also in the markup phase of the Wyckoff Price Cycle thus supporting a bullish tone.
We suggest a medium capital at-risk allocation to this trade. Increase exposure for a break above R405.
Share Information
| Share Code | CLS |
|---|---|
| Industry | Food and Drug Retailers |
| Market Capital (ZAR) | 91.84 billion |
| One Year Total Return | 37.97% |
| Return Year-to-Date | 21.15% |
| Current Price (ZAR) | 385.77 |
| 52 Week High (ZAR) | 403.39 |
| 52 Week Low (ZAR) | 275.50 |
| Financial Year End | August |
| The share has made solid progress year-to-date, with several technical indicators pointing to further upside potential. The price remains above its 200-day simple moving average (SMA). | |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (ZAR) | 11.94 | 13.52 | 15.36 | 17.38 |
| Growth (%) | 13.29 | 13.57 | 13.17 | |
| Dividend Per Share (ZAR) | 7.76 | 8.51 | 9.69 | 10.98 |
| Growth (%) | 9.64 | 13.83 | 13.37 | |
| Forward PE (times) | 28.53 | 25.12 | 22.20 | |
| Forward Dividend Yield (%) | 2.21 | 2.51 | 2.85 | |
| Earnings growth is expected to remain robust over the forecast term. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | SHP - Buy (Continue to hold) |
WHL - BUY (Continue to hold) |
TBS - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 292.78 | 60.82 | 224.91 |
| Current | 314.52 | 64.80 | 238.72 |
| Movement | +7.4% | +6.5% | +6.1% |
|
A price that appears to be in a phase of low volatility remains of interest. The start of upside price momentum is a positive. Remains above its 200-day simple moving average. Our profit target is at R317.00 with a trailing stop-loss at R286. Exit the trade on 1 September 2024. |
A price building a base remains of interest. Upside price momentum is encouraging. Remains above its 200-day simple moving average. Our profit target is at R71 with a trailing stop-loss at R61.60. Exit the trade on 25 November 2024. |
A price at major resistance remains of interest. Downside price momentum is a concern. Remains above its 200-day simple moving average. Our profit target is at R260 with a trailing stop-loss at R213.90. Exit the trade on 28 April 2025. |
| Share Name and Position | QLT - Buy (Continue to hold) |
OMU - Buy (Continue to hold) |
INL - BUY (Continue to hold) |
|---|---|---|---|
| Entry | 31.11 | 12.48 | 139.53 |
| Current | 32.62 | 12.65 | 139.17 |
| Movement | +4.9% | +1.4% | -0.3% |
|
The price appears to be developing the 5th wave of the Elliott Wave Price analysis. Downward momentum is concerning. Remains above its 200-day simple moving average.
Our profit target is at R35 with a trailing stop-loss at R31.10. Exit the trade on 2 December 2024. |
A price building a base remains of interest. Downside price momentum has halted. Remains above its 200-day simple moving average.
Our profit target is at R14.40 with a trailing stop-loss at R11.80. Exit the trade on 17 December 2024. |
Historical seasonal strength from October to January remains of interest. Trades above its 200-day simple moving average. Fading downside momentum supports the trade.
Our take profit target remains at R155 with a trailing stop-loss level at R133. Exit the trade on 20 January 2025. |
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